Indonesia Stocks Enter Bear Market After Losing 20% Since May

Indonesian stocks fell, with the benchmark index entering a bear market after losing 20 percent from a record high three months ago.

The Jakarta Composite Index declined 1.1 percent to close at 4,171.41, the lowest since Sept. 13, 2012. Animal feed producer PT Charoen Pokphand Indonesia dropped 13 percent and was the biggest drag on the index. PT Bank Rakyat Indonesia, the country’s second largest lender by assets, fell 4.4 percent.

A record current-account deficit in the second quarter and worse-than-expected economic growth and inflation data spurred investors to offload stocks and send the rupiah to its weakest level since April 2009. Foreign investors sold a net of $434.7 million worth of equities this week through yesterday.

“The market is likely to remain sideways or down.” Laurentia Amica Darmawan, a fund manager at First State Investments, which manages about 5.9 trillion rupiah ($529.4 million), said by phone from Jakarta. “There has been no major catalyst to drive the market up. Investors will wait for the next inflation numbers so they can determine if it has reached its peak.”

Interest-rate sensitive industries including property, construction and automotive are likely to be under pressure in the near term, Citigroup Inc. analysts led by Ferry Wong said in report yesterday. Wong is overweight media, bank and cement stocks as well as some consumer-goods companies. PT Bank Mandiri, PT Bank Negara Indonesia, PT Surya Citra Media, PT Media Nusantara Citra and PT Semen Indonesia are among Citigroup’s top picks.

The slump for the Jakarta index pushed its valuation to 12.3 times projected 12-month earnings, the lowest level since June 2012, according to data compiled by Bloomberg. The measure’s valuation reached 15.9 times on May 20.

The rupiah fell 0.4 percent to 10,818 per dollar, after reaching 10,826 earlier, its weakest level since April 2009. The yield on 10-year government bonds fell to 8.42 percent, prices from the Inter Dealer Market Association showed.

Before it's here, it's on the Bloomberg Terminal.